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The power of partnerships

Sep 22, 2016

Speech given by Maarten Wetselaar, Integrated Gas & New Energies Director at Shell, at DELFT University in The Netherlands on September 22, 2016.

Maarten Wetselaar took part in a debate with Laszlo Varro, the International Energy Agency’s Chief Economist, and Aad Correljé, an Associate Professor at DELFT University. The debate focused on the role of natural gas in the future energy system. Maarten argued that gas should play an increasingly prominent part, both in its own right, and as a partner for renewables.

Good afternoon everyone. It’s a pleasure to be here with you all.

This event wouldn’t have been possible without a lot of hard work by Anoek van Vlaardingen and her team at DELFT University. I would like to thank them for bringing us together.

Effective partnerships are important in many walks of life.

Look at the Olympics, where the rowers Maaike Head and Ilse Paulis worked together brilliantly to claim gold for the Dutch.

Look at politics, where opposing parties form coalitions in the best interests of the country.

And look at academia. I’d wager every student in this room has benefited from teaming up with class-mates.

The world of energy is no different.

There are many kinds of partnership at play.

Between governments, business, civil society and universities like DELFT. Between energy sources and different sectors of the global economy. And between natural gas and other sources of energy.

More energy, fewer emissions

These partnerships have never been more important, because the scale of the global energy challenge has never been greater.

The world’s demand for energy is expected to double in size this century. A significant rise in demand is likely to come from China, India, South-east Asia, Africa and the Middle East. This is down to growing populations improving living standards and national economic development gathering pace.

While more energy is giving more people opportunities to better their lives, around 1.1 billion people still live without electricity, according to the World Bank.

As well as focusing on energy access for everyone, climate change and air quality also need to be tackled.

Last year, this challenge was summed up by world leaders at the United Nations Sustainable Development Summit in New York. They described it as “access to affordable, reliable, sustainable and modern energy for all.”

Put another way, it’s about providing much more energy with far fewer greenhouse gas emissions, including carbon dioxide.

There’s no doubt this is an unprecedented technical, economic and social challenge.

The entire global economy – from power to buildings, transport to industry – will need to transform.

But it is achievable.

As some of you know, Shell has set out a plausible route for the world to reach economic growth and net-zero emissions from energy near the end of this century.

Net-zero means emissions in some sectors are offset by efforts to remove CO2 in the atmosphere, including large-scale industrial facilities built to capture and store CO2. As a result, no additional emissions enter the atmosphere.

So how will the world reach this point?

Landmark agreement

A big stride forward was made at the historic UN climate summit in Paris late last year.

World leaders agreed to work towards keeping the global rise in temperature from pre-industrial times to well below 2°C. The aim is to avoid serious effects of climate change, from floods to droughts.

Businesses and civil society participated throughout the two-week meeting.

Laszlo – I’m aware that the International Energy Agency was involved in nearly 100 side events. And Shell people on the ground told me that a vast range of voices could be heard, from environmental NGOs to renewables energy companies.

In the agreement itself, world leaders recognised the importance of mobilising “stronger and more ambitious climate action” from all stakeholders, from big companies to universities.

This signals a clear intent from governments to encourage a global partnership to address climate change.

The Paris deal is, however, just like buying gym membership after an indulgent festive season. It’s an encouraging step forward, signalling good intent.

But buying gym membership is one thing. Going regularly is another. Business, governments and the world’s citizens should all now act together with urgency to ensure the ambitions of this global agreement are realised.

Diverse energy source

Another important partnership will be the one between gas and different sectors of the global economy.

Why? Because gas is one of the few energy sources that can meet all of the world’s energy needs at reasonable cost to the consumer.

It lights and heats homes and businesses.

In transport, it can power cars, trucks and ships.

In heavy industry, it produces the extremely high temperatures needed to make essentials such as iron, cement and steel.

And it’s needed for everyday products too. For example, components of gas are used to make fertiliser, which helps feed billions of people.

But its diversity is far from the only reason why gas is such a key partner for these sectors. As well as other advantages, gas also emits half the CO2 and one tenth of the air pollutants as coal when used to generate electricity.

If the world replaced all of its coal-fired power with cleaner-burning gas, the annual CO2 emissions savings would be 4 gigatonnes. That’s 10% of global energyrelated CO2 emissions. Put another way, it’s equivalent to taking nearly all the world’s light duty vehicles off the road.

Gas and renewables

Although gas is critical to meeting demand while lowering emissions, other sources of energy are clearly also needed.

Renewables must play an increasingly vital role in a transition to a low-carbon future.

But wind and solar only produce electricity, which meets less than one-fifth of global energy demand today.

So for renewables to have a bigger impact on reducing emissions, electricity has to play a large part in other key sectors of the economy, including transport and industry.

Even with significant growth, however, renewables will still need a partner on the path to a low-carbon future. To provide energy to parts of the economy which can’t be electrified, such as air travel, chemicals, steel production and marine shipping. And to provide reliable power when the sun isn’t shining and the wind isn’t blowing.

Gas is an abundant, reliable and versatile partner for that journey. As such, it should play an increasingly prominent role in the future energy mix, both in its own right, and as a partner for renewables.

An effective partnership between gas and renewables can be seen in Brazil.

In 2011, 90% of the country’s electricity was powered by hydro. But by 2015, this had dropped to around 70% because the country suffered a severe drought.

A shortage of rainfall meant Brazil relied a lot on gas to meet demand for power. During those four years, imports of liquefied natural gas increased 800%.

Future partnerships between gas and renewables will take different forms in different countries.

Here in the Netherlands, a combination of gas plus offshore wind will ensure future demand is met while lowering emissions, as power generation from coal falls across Europe in the years ahead.

For its part, Shell is committed to the partnership of gas plus renewables in the global energy mix.

Our acquisition of the oil and gas company BG Group underpins our role as the largest independent producer and marketer of liquefied natural gas.

And earlier this year Shell established a new energies business, which is exploring options around our established strengths in low-carbon biofuels, hydrogen and smart customer solutions; as well as in solar and wind. We were recently part of a consortium bidding for the Borssele offshore wind tender in the North Sea, for example.

Consumer

Time to conclude.

The final partnership I want to flag is between you, me and every energy consumer on the planet.

Meeting future global energy demand while tackling climate change can be achieved by ensuring that in every country the average person uses around 100 gigajoules of energy a year.

This will ensure the basic needs of housing, health care, transport and sanitation are met.

But at present, the average person living in Europe uses 150 gigajoules a year. As for North America, one person’s demand for energy is currently twice what it is in Europe.

This means big efforts to boost efficiency are needed.

Yes, governments need to take a central role to tackle climate change. And yes, businesses like Shell and universities like yours must play their part. But the actions taken by the consumer mustn’t be underestimated.

Because it is only through a united effort that the world will successfully transition to a low-carbon future.

Just over three decades ago, Shell’s CEO, Ben van Beurden, graduated from this university with a master’s degree in chemical engineering. I wonder where you’ll all be 30 years from now and what role you will play?

Don’t accept the status quo. Disrupt it. Keep learning. And develop a global perspective. Because you are part of the answer to successfully addressing this great global energy challenge.

Your professors are equipping you with the skills and knowledge you’ll need to make a prominent mark in this exciting industry. I encourage you to do just that.